Oil markets moved unevenly on Wednesday as traders weighed whether a possible record release of emergency reserves by the International Energy Agency would be sufficient to counter supply disruptions linked to the ongoing U.S.-Israeli conflict with Iran.
Brent crude futures rose 59 cents, or 0.7%, to $88.39 per barrel by 07:27 GMT. U.S. West Texas Intermediate (WTI) crude climbed 98 cents, or 1.2%, to $84.43 per barrel.
Earlier in the Asian session both benchmarks extended their losses after plunging more than 11% on Tuesday, even though U.S. crude initially surged roughly 5% at the opening of trading.
The Wall Street Journal reported that the IEA is evaluating a strategic reserve release that could surpass the 182 million barrels made available by member countries in two rounds during 2022 following Russia’s invasion of Ukraine. The report cited officials familiar with the discussions.
Goldman Sachs analysts wrote in a client note that a release of that magnitude would compensate for around 12 days of disruption, based on the bank’s estimate of a 15.4 million barrel-per-day interruption in oil exports from the Gulf region.
On Tuesday, the United States and Israel launched what Pentagon officials and Iranian sources described as the most intense round of airstrikes since the conflict began.
The U.S. military also “eliminated” 16 Iranian vessels believed to be involved in laying naval mines near the Strait of Hormuz, according to U.S. Central Command. U.S. President Donald Trump warned that any mines placed in the waterway must be removed immediately.
However, some analysts questioned whether a coordinated reserve release would meaningfully change the price outlook.
“Moves like IEA SPR release are not the solution to the crisis. How oil prices will evolve will depend on the duration of the Iran war,” said Suvro Sarkar, head of the energy sector team at DBS.
Short-term price spikes may be “reined in through periodic strategic signalling moves like we have seen over the past couple of days to calm markets down,” Sarkar added.
Officials from the Group of Seven have also held online discussions about a possible release of emergency oil reserves to cushion the market impact of supply disruptions.
French President Emmanuel Macron is set to host a virtual meeting with other G7 leaders on Wednesday to discuss the conflict’s implications for global energy markets and consider possible responses.
Trump has repeatedly said that the United States stands ready to escort oil tankers through the Strait of Hormuz if required. However, sources told Reuters that the U.S. Navy has declined requests from shipping companies for military escorts for now, citing the elevated risk of attacks.
Supply risks persist
Abu Dhabi’s state-owned oil company ADNOC has halted operations at its Ruwais refinery after a fire broke out within the complex following a drone strike, according to a source. The incident represents another disruption to energy infrastructure tied to the U.S.-Israeli conflict with Iran.
Saudi Arabia, the world’s largest oil exporter, is reportedly increasing shipments through the Red Sea, though volumes remain far below the levels needed to offset reduced flows through the Strait of Hormuz, according to shipping data.
The kingdom is relying on its Red Sea export hub at Yanbu to boost shipments and avoid steep production cuts, while neighbouring producers including Iraq, Kuwait and the United Arab Emirates have already reduced output.
Energy consultancy Wood Mackenzie estimates that the conflict is currently removing roughly 15 million barrels per day of Gulf crude and refined products from the global market, a disruption that could potentially drive oil prices as high as $150 per barrel.
“Even a quick resolution probably implies weeks of disruption for energy markets yet,” Morgan Stanley said in a note.
Highlighting stronger demand, U.S. inventories of crude oil, gasoline and distillates declined last week, according to market sources citing data released Tuesday by the American Petroleum Institute.
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